A. Yes. The risk is that in delaying discussions about restructuring the debt, we realise in one or two years that the terms of the bailout package will not be respected.

We want Greece to keep a huge primary budget surplus for 20 to 30 years, which will mean setting aside an enormous budget for repayments.

How do you justify that to young Greeks? It would be reasonable to say that until the Greek economy has been rebuilt, a reduced primary budget surplus, around the level of GDP, will have to do. That’s normal and not excessively punitive.”

“The fresh dose of deflationary measures in Greece’s new €86bn (£62bn) bailout programme, agreed in July after Tsipras folded under pressure from creditors, will deepen a depression similar in its severity to those that afflicted Germany and the United States in the 1930s. The Greek economy has contracted by 29% since 2009 and is still shrinking after months of financial turmoil. Yet Greece remains part of a single currency that has emerged bloodied but intact. […]

The danger is that the austerity conditions remain fully in force and debt relief is much less generous than Tsipras is hoping for. It will require an improbably strong and rapid recovery for Greece to meet the optimistic growth and deficit reduction targets contained in its current bailout deal. As a result, the likelihood is that they will be missed, leading to pressure for further budget cuts.

What does that mean? It means that Greece will be back in the headlines for all the wrong reasons before too long. There will be talk of the need for a fourth bailout and of possible default if Greece doesn’t get one. The election is over; the economic crisis is not.”

“Tsipras must now implement a fiscal consolidation and reform programme that was designed to fail. Illiquid small businesses, with no access to capital markets, have to now pre-pay next year’s tax on their projected 2016 profits. Households will need to fork out outrageous property taxes on non-performing apartments and shops, which they can’t even sell. VAT rate hikes will boost VAT evasion. Week in week out, the troika will be demanding more recessionary, antisocial policies: pension cuts, lower child benefits, more foreclosures.

The prime minister’s plan for weathering this storm is founded on three pledges. First the agreement with the troika is unfinished business, leaving room for further negotiation of important details; second, debt relief will follow soon; and third Greece’s oligarchs will be tackled. Voters supported Tsipras because he appeared the most likely candidate to deliver on these promises. The trouble is, his capacity to do so is severely circumscribed by the agreement he has already signed.

His power to negotiate is negligible given the agreement’s clear condition that the Greek government must ‘agree with the [troika] on all actions relevant for the achievement of the objectives of the memorandum of understanding’ […]”

“Let’s look at what passes for success in Spain, which has, somewhat incredibly, been elevated as a role model: [Chart]

We see an awesome slump that leaves Spain far below its pre-crisis level of output, and even further below its pre-crisis trend, followed by an upturn that, even if it continues at the current pace, will take many years to recover the lost ground.”

[Poland is] also a country with relatively low productivity by northwestern European standards, indeed lower productivity than Greece by standard international measures: [Chart]

But Poland has not had a Greek-style crisis, or indeed any crisis at all. Instead, it has powered through the turmoil of recent years: [Chart]

What’s the difference? The main answer, surely, is the euro: by adopting the euro Greece first brought on massive capital inflows, then found itself in a trap, unable to achieve the needed real devaluation without incredibly costly deflation.”